Sri Lanka rejected a call by the European Union today for an immediate ceasefire between the army and Tamil Tiger rebels in the north-east of the country, after similar demands by the UN that the two sides suspend the war to let up to 170,000 trapped civilians escape.

Benita Ferrero-Waldner, the EU's external relations commissioner, described the situation for the trapped civilians as "very dangerous" and signalled that a diplomatic mission would be sent to Colombo.

A spokesman for the foreign ministry dismissed the call, saying any interruption "would just present a chance for the terrorists to regroup and rearm". The government says that the "fanatical hardcore fighters are now hiding behind thousands of human shields".

The separatist guerrilla group, known formally as the Liberation Tigers of Tamil Eelam (LTTE), has been cornered in a spit of land on the north-east coast measuring 12 square miles – but have with them tens of thousands of civilians.

The army said that 36 LTTE fighters were killed in battles yesterday around the last rebel enclave. Aid agencies have said that the group has been forcibly recruiting children in ever-increasing numbers, including the 16-year-old daughter of one of the UN's local employees.

Ferrero-Waldner told reporters "approximately 170,000 people … are being trapped in the northern part of Sri Lanka and neither the Sri Lanka government nor the LTTE has until now accepted our appeal".

The government disputes the figures, saying the number of trapped civilians is closer to 70,000 and that it is setting up camps to deal with the eventual flood of refugees. "We want innocent civilian people to leave the area without bloodshed," said the spokesman.

The international community has become vocal about the plight of civilians in the war zone, although the government in Colombo says that there has been "much non-credible reporting of the issue".

Sri Lanka took exception to comments by the UN high commissioner for human rights, Navi Pillay, who claimed both the government and the LTTE may have committed war crimes.

Pillay, a former UN war crimes judge who is Tamil by descent and grew up in South Africa, said at the weekend that "certain actions being undertaken by the Sri Lankan military and by the LTTE may constitute violations of international human rights and humanitarian law".

Like the EU, she warned that the loss of life in the last stages of the war may reach "catastrophic" levels and urged the government and the rebels to call a truce and allow the evacuation of civilians.

Pillay said that according to a number of sources more than 2,800 civilians may have been killed and more than 7,000 wounded since 20 January. However the Sri Lankan government said the "credibility of the sources should be questioned".

The commissioner had accused government forces of shelling safe zones intended to protect civilians – a charge denied by authorities in Colombo – but agreed that the Tamil Tigers had held civilians as human shields. There have been eyewitness reports of the LTTE firing at people who have tried to flee.

"The brutal and inhuman treatment of civilians by the LTTE is utterly reprehensible and should be examined to see if it constitutes war crimes," she said. "The world today is ever sensitive about such acts that could amount to war crimes and crimes against humanity."

The UN and other aid agencies cannot operate in the "no fire zone" and there have been calls for international non-governmental organisations to be allowed in to monitor human rights and humanitarian conditions.

Rajiva Wijesinha, secretary at Sri Lanka's ministry of disaster management and human rights, said the country would not compromise on security measures but would uphold its duty to protect all civilians.

The US has also expressed concerns about the plight of civilians. Last week the US secretary of state, Hillary Clinton, called the Sri Lankan president, Mahinda Rajapaksa, to voice "deep concern over the deteriorating conditions and increasing loss of life" in the official safe zone.